Your Net Worth Goes Up When You Take These Actions

Disclosure: This article is written for entertainment purposes only and should not be construed as financial or any other type of professional advice.

When I was younger, I wrestled with whether to pay off debt, build a cash reserve, or invest for the long-term future. Each was important. Yet, they seemed like conflicting, even mutually exclusive goals.

For example, if I paid extra on any credit card balances or my mortgage loan, then I’d have less cash in the bank or fewer dollars to contribute to retirement and college savings accounts. I could earn a guaranteed return that is equal to loan interest rates if I paid down debt. But then I’d forgo the potential for compound growth in the stock market.

What I learned was that a positive move — whether making a loan payment, increasing my cash reserve, or investing for the future — can increase my net worth. I don’t have to choose the best move to make. I simply have to take one of these actions and, at the same time, avoid taking on additional debt or spending more than I just saved.

Net Worth, Defined

First, let me define net worth; then I’ll explain how my net worth goes up when I take certain actions.

Net worth is the sum of my assets less my liabilities. Here’s a formula for determining net worth:


FDIC-insured bank and/or credit union accounts

  • checking account balances
  • savings account balances
  • certificates of deposit (CDs)

Retirement accounts

  • traditional IRAs
  • Roth IRAs
  • IRA rollovers
  • 401(k) balances
  • other retirement plan balances

College savings accounts

  • 529 savings plans and/or 529 prepaid tuition plans
  • Coverdell education savings accounts

Regular investment accounts (non-tax-advantaged, not FDIC-insured)

  • money market account balances
  • self-managed investment account balances including stocks, mutual funds, ETFs, and bonds
  • managed accounts (managed portfolios, advisory accounts)

Real estate

  • market value of your primary residence
  • market value of rental properties, commercial and residential
  • market value of vacation properties

Personal property

  • vehicles
  • jewelry
  • valuables worth $1,000 or more

Additional assets

  • cash value of life insurance
  • other assets


Pending bills

  • upcoming insurance bills
  • property taxes
  • other large bills, not paid monthly

Loan balances

  • mortgage on primary residence
  • mortgages on rental properties
  • mortgages on vacation homes
  • home equity loans and lines of credit
  • credit card balances
  • student loans
  • car loans
  • other loans or obligations

For example, if I have $1,000 in a checking account, $15,000 in a savings account, $450,000 in a retirement accounts, $100,000 in a taxable investment account, and own a home that’s worth $250,000 (even with a mortgage), then my assets are valued at $816,000. From that amount, I’d subtract monthly bills of $500 waiting to be paid, an outstanding mortgage balance of $100,000, and a car loan of $5,000. Using the formula of net worth = assets – liabilities, my net worth is $710,500.

Ways to Increase Net Worth

My net worth goes up when I take actions that increase my assets or reduce liabilities. Here are several ways I can increase my net worth:

  1. Open a savings account.
  2. Start making direct deposits from your paycheck to a savings account.
  3. Buy a CD.
  4. Begin building an emergency fund or increase its balance.
  5. Open and fund a regular (taxable) account with an online brokerage firm.
  6. Set up automatic purchases of a specific investment, such as an index mutual fund, with a brokerage firm.
  7. Open and fund an account with a robo-advisor.
  8. Set up automatic contributions to an advisory account.
  9. Enroll in a 401(k) plan at work. Contribute at least enough to get the employer’s full match, if offered.
  10. Increase 401(k) contributions. If 50 or older, make catch-up contributions.
  11. Open and fund an IRA, traditional or Roth.
  12. Add to an IRA. If 50 or older, make catch-up contributions.
  13. Keep making payments on any loans, whether student loans, car loans, home equity loans, mortgages, or credit card debt.
  14. Pay extra on any loans to reduce outstanding balances.
  15. Open an account to pay for children’s education (such as a 529 Plan or Coverdell account).
  16. Find a way to spend less today and divert savings to a savings account or brokerage account.
  17. Reduce discretionary expenses (entertainment, gifts, eating out, etc.) and apply savings to paying off a loan.
  18. Use money gifts from the family to boost savings, college education, or investment accounts.
  19. Eliminate a recurring expense for a product or service no longer needed or desired (such as electronic subscriptions I no longer use); use extra money to boost savings or reduce debt.
  20. Apply any tax refunds or bonuses to increase the balance of an IRA or regular taxable account.

These are simple ways to increase net worth. They’ll all make a difference to my personal balance sheet (assets less liabilities). The only caveat is that I can’t increase your borrowing to support contributions to bank accounts, investment accounts, or loan payoffs.

Note that in some cases, I don’t have to do anything to grow my net worth. For example, if my home’s value increases as a result of general market conditions, then my net worth increases at the same time. Similarly, if the price of my holdings in stocks, mutual funds, and ETFs rises, then my net worth rises also. (Unfortunately, my net worth can decline if these lose value; but taking actions mentioned here will generally lead to a better financial condition compared to inaction.)

Though I can’t control market movement, I can take simple steps to increase your net worth.

In my experience, it’s fine to debate the decision to focus on paying off debt, build regular savings, or invest for the long-term future. What’s best for my family may change over time. But I take comfort in knowing that any of these actions can help grow my net worth.

2 responses to “Your Net Worth Goes Up When You Take These Actions

  1. I’m a firm believer in making sure you eradicate debt before you start building up your assets because debt is pervasive and a constant drain on the rest of your finances. While everyone’s situation is certainly unique, the interest you pay on debt just keeps holding you down.

    The only exceptions would be funding an emergency fund, because one of those can derail you and put you even further into debt, and any retirement savings that come with a match because, well, who doesn’t like free money? 🙂

    1. Thanks for commenting!

      I started investing while I still had a car loan partly because I didn’t realize that it was often considered “wrong” to invest before I became debt-free. But that was back in the 1980s when you could still deduct interest from consumer loans and even credit card debt. It seemed to work for me because I had a fairly low expense structure at the time and a good cash flow that covered both my borrowing and investing. But everyone’s situation is different.

      What I’ve seen is that some folks feel paralyzed with the debt-investing decision and then end up doing nothing — neither being aggressive with their loans or investing. Though I agree with having the emergency fund well before investing; nearly everyone can benefit from having cash on hand to avoid having to take on more debt.

      Also, my concern is that people may wait until their 40s or 50s before getting debt-free and starting to invest, and then make a bunch of costly moves. It could be better to invest small amounts when you’re young to learn how to invest, how to set expectations for investments, etc.

      But paying off debt (as long as you don’t take on more debt or spend down your cash) is a sure thing as far as improving your net worth while investing may or may not increase your net worth depending on investment valuations.

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